On Oct 9, we upgraded TRW Automotive Holdings Corp. (TRW) to Outperform based on improved earnings in the second quarter of 2013 and improved guidance for the year. In addition, benefits from its market leading position and investment in innovative technologies that enable it to achieve contract wins are the other drivers for the bullish stance.
Why the Upgrade?
On Jul 30, TRW reported earnings that increased 17.4% to $2.02 per share in the second quarter of the year from $1.72 (all excluding special items) a year ago and exceeded the Zacks Consensus Estimate of $1.70.
Revenues in the quarter grew 6.5% to $4.5 billion, driven by strong demand for TRW’s innovative technologies and higher vehicle production volumes in North America and China. Revenues were higher than the Zacks Consensus Estimate of $4.4 billion.
Following the release of the second quarter results, the Zacks Consensus Estimate for 2013 increased 4.9% to $6.64 per share. The Zacks Consensus Estimate for 2014 increased 3.4% to $7.66 per share. Currently, TRW retains a Zacks Rank #2 (Buy).
TRW Automotive is globally recognized as one of the largest and most diversified suppliers of automotive systems, modules and components to Original Equipment Manufacturers and the related aftermarket. The company benefits from its constant efforts to upgrade and improve its vast product portfolio, which is capable of generating top- and bottom-line growth even during a soft automotive climate.
TRW’s credit rating was upped to ‘BBB-’ from ‘BB+’ by Standard & Poor’s (S&P) Ratings Services. The revision in TRW’s rating is based on solid performance by the company in the second quarter of 2013, strong cash flow and expectation of better performance in the future.
For full year 2013, TRW anticipates production of 16.1 million units in North America and 18.6 million units in Europe. Revenues for 2013 are expected in the range of $16.8 billion to $17.0 billion compared with $16.4 billion recorded in 2012.
Other Stocks to Consider
Some other stocks that are performing well in the industry where TRW operates include Denso Corp. (DNZOY), Lear Corp. (LEA) and Magna International Inc. (MGA). All these companies carry a Zacks Rank #1 (Strong Buy).